LIABILITIES AND DEBT
|3 Months Ended|
Mar. 31, 2022
|LIABILITIES AND DEBT|
|LIABILITIES AND DEBT||
NOTE 6: LIABILITIES AND DEBT
Accrued Expenses and Other Liabilities
The Company accrued expenses and other liabilities line in the consolidated balance sheets is comprised of the following as of March 31, 2022 and December 31,2021:
Certain liabilities including sales tax and payroll related liabilities maybe be subject to interest in penalties. As of March 31, 2022 and December 31, 2021, payroll related labilities included approximately $262,000 in estimated penalties associated with accrued payroll taxes.
In February 2022, the Company received $237,500 in proceeds, including loan fees of $12,500, from the existing venture debt lender under the same terms as the existing facility. As of March 31, 2022 and December 31, 2021, the gross loan balance was $6,251,755 and $6,001,755, respectively.
As of March 31, 2022, all payments have been deferred to the maturity date of the loan, December 31, 2022. As of the filing date, of these financial statements, all defaults were cured and there are no additional expected defaults.
For the three months ended March 31, 2022 and 2021, $12,500 and $113,993 of loan fees and discounts from warrants were amortized to interest expense, leaving unamortized balances of $0 as of March 31, 2022.
Interest expense and effective interest rate on this loan for the three months ended March 31, 2022 and 2021 was $191,152 and $199,986, and 12.5% and 20.9% all respectively.
2020 Regulation D Offering
As of March 31, 2022 and December 31, 2021, there was $100,000 remaining in outstanding principal that was not converted into equity.
Convertible Promissory Note
During the three months ended March 31, 2022, the Company converted an aggregate of $888,930 in outstanding principal into 873,901 shares of common stock.
During the three months ended March 31, 2022, the Company amortized $1,058,583 of debt discount to interest expense.
As of March 31, 2022 and December 31, 2021, the outstanding principal was $8,576,070 and $9,465,000, respectively. The balance of the convertible notes, after unamortized debt discount of $2,904,803, was $5,671,267 as of March 31, 2022.
Loan Payable — PPP and SBA Loan
As of March 31, 2022 and December 31, 2021, Harper & Jones had an outstanding loan under the EIDL program of $148,900.
In May 2021, H&J entered into a loan payable with a bank and received proceeds of $75,000. The line bears interest at 7.76% and matures in December 2025. As of March 31, 2022 and December 31, 2021, the outstanding balance was $80,370 and $149,962, respectively.
Note Payable – Related Party
As of March 31, 2022, H&J had an outstanding note payable of $309,489 owned by the H&J Seller. The note matures on July 10, 2022 and bears interest at 12% per annum.
Promissory Note Payable
As of March 31, 2022 and December 31, 2021, the outstanding principal on the note to the sellers of Bailey was $3,500,000. As of March 31, 2022, the lender agreed to defer all payments to the maturity date of the loan, December 31, 2022.
Interest expense was $105,000 and $135,000 for the three months ended March 31, 2022 and 2021, respectively, all of which was accrued and unpaid as of March 31, 2022.
Merchant Cash Advances
In March 2022, the Company obtained two short-term merchant advances, which totaled $500,000 and $250,000, respectively, from a single lender to fund operations. These advances included origination fees totaling $22,500 for net proceeds of $727,500. These advances are, for the most part, secured by expected future sales transactions of the Company with expected payments on a weekly basis The Company will repay an aggregate of $1,065,000 to the lender. These advances contain various financial and non-financial covenants. As of the date of these financial statements, the Company was in compliance with these covenants.